Germany

Commerzbank priced its inaugural public sector benchmark covered bond on Tuesday. The latest issue was another five year, after Aktia Bank and Helaba broke the drought in that maturity on Monday. Despite investors becoming more risk averse, funding officials at Aktia and Helaba told The Cover on Tuesday that the five year was their choice of tenor and said this was not dictated by market conditions.

Covered bonds backed by loans to small and medium-sized enterprises (SMEs) are gaining traction as a funding tool for European banks and could soon become a feature in Italy, Spain and France, according to Moody’s.

Cover pool encumbrance was steady last year versus the previous year, Fitch said on Thursday. The most stable levels were among the most encumbered institutions, where covered bonds have made up a large share of their financing for a long time.

Deutsche Hypothekenbank took advantage of a ratings lift from Moody’s to launch a €500m seven year mortgage Pfandbrief into a quiet primary market on Monday, despite the uncertain macro-economic backdrop which has caused fixed income volatility.

The covered bond pipeline is building with several transactions rumoured, a New Zealand bank on the road and a German issuer on Friday mandating banks for a trade next week.

Holidays in Germany and the UK next week shrink the issuance window but covered bond bankers still expect benchmark deals. A seven year tenor makes for simple execution, but Deutsche Pfandbriefbank’s (Pbb) 15 year bond has captured issuers’ imaginations, said syndicate officials.

Deutsche Pfandbriefbank (Pbb) returned to the public sector Pfandbrief market in style this week. It extended the German covered bond curve with an impressive 15 year deal and plans to issue at least one public sector backed bond a year, it told The Cover.

Speaking to The Cover on Thursday, SEB’s head of treasury management John Wang emphasised the granularity of the book for the bank’s inaugural dollar trade that was launched on Tuesday.

WL Bank priced a €500m seven year Pfandbrief almost flat to mid-swaps on Thursday, to the surprise of some syndicate bankers on the deal.

Deutsche Pfandbriefbank launched the longest German Pfandbrief in nine years on Wednesday, pricing a €500m 15 year deal. The potential for more ultra-long dated deals is limited, but Pbb’s success in an unusual tenor illustrates just how flexible desperate investors have become, said bankers.

Rare issuer WL Bank has picked banks to manage its latest Pfandbrief and is aiming to launch a seven year euro denominated bond as early as Thursday, said bankers.

The subject of SME-backed covered bonds continues to provoke a sharp division of opinion within the industry. And it was a lively topic at the annual covered bond investor conference, held on Thursday in Frankfurt.